RBI allows banks to continue giving credit to NBFCs for on-lending to priority sector
Reserve Bank has asked banks as well as small finance banks (SFBs) to continue lending to the NBFCs for the purpose of on-lending to certain priority sectors.
This was allowed till March 31, 2022, for banks to NBFCs and SFBs to NBFC-MFIs.
"To ensure continuation of the synergies that have been developed between banks and NBFCs in delivering credit to the specified priority sectors, it has been decided to allow the... facility on an on-going basis," RBI said in a circular.
RBI has said lending to NBFCs, including HFCs, should not be more than the overall limit of 5 percent of an individual bank's total priority sector lending in the case of commercial banks.
SFBs have been allowed to offer credit up to an overall limit of 10 percent of an individual bank's total priority sector lending to NBFC-MFIs (Non-Banking Financial Company - Micro Finance Institutions) and other MFIs (Societies, Trusts, etc) which are members of RBI recognised 'Self-Regulatory Organisation' of the sector.
The eligible registered NBFC-MFIs and other MFIs should have Gross Loan Portfolio (GLP) of up to Rs 500 crore as on March 31 of the previous financial year, for the purpose of on-lending to priority sectors.
Adherence to the prescribed cap will be calculated by averaging across four quarters of the financial year, the RBI circular said.